Wednesday, 2 November 2011

Off to Cannes

Prime Minister George Papandreou gained the support of his Cabinet in an all-night meeting which started at 20:00 and ended around 03:00. Today he’s off to Cannes, where he will meet with President Nicholas Sarkozy, Chancellor Angela Merkel and others at around 20:00.

The chaos left in the wake of the referendum decision has been widespread. The IMF is considering whether release of the sixth tranche is allowed given the uncertainty of the referendum. Similar comments have been made in The Netherlands and Germany. President Sarkozy made no secret of his anger at not having been consulted beforehand, and at the manner in which the referendum has been raised. Markets fell dramatically yesterday, although there are signs of a rebound today.

Some commentators, such as Sven Boll writing in Der Spiegel, maintains that a referendum is the correct action for the following reasons:

First, the prime minister needs immediate legitimacy for his actions. He was elected before the escalation of the debt crisis; his policies require extreme steps. In Greece, unlike in Germany, political parties aren't bickering over a little more net from the gross, a tax for motorways or the closure of a few military bases. No, it is about brutal cuts never before seen in a developed country. If the German finance minister cut spending as ruthlessly as his Greek counterpart, he would have to spend about €100 billion less in a single year.

Secondly, the opposition in Greece is an obstruction. They have also failed to understand after a year and a half that the country cannot afford any party political antics. With a popular vote, at least there is hope that the opposition will come to their senses. At the very least, they must make their position clear on how they imagine the country's future.

Thirdly, Greece finds itself in a downwards spiral. Almost all of its citizens are victims of the austerity measures; many feel desperate and aregoing on strike. But when those who still do have jobs also no longer work, the economy is harmed even further. The vicious cycle continues. New, tougher measures are needed, and so on. If the majority of the population avowed itself to a way out of the crisis, this horrific situation would most likely be over. Strikes would probably be delegitimized.

Yet these reasons are hardly convincing:

a.Greece is in a crisis precisely because George Papandreou made political decisions which were wrong, starting with the means with which he handled the debt discovery process as well as with the first bail-out package agreement. These mistakes were compounded by a failure to control the venality and incompetence of his close political circle and that of his cabinet, as well as a failure to take substantial economic measures either early in the situation, or even today.

b.The opposition has always been an obstruction in Greece, and likely will remain so. To suggest that disrupting the deal agreed upon last week in order to “make their position clear on how they imagine their country’s future” is simply naïve.

c.Strikes will most certainly not be deligitimised in Greece as a result of a referendum. This is a viewpoint which can only be expressed by someone who is unaware of how PASOK itself has used unions and industrial action to block government policy for generations. Today, this tactic is embedded in Greek society, and will not at all be affected by a referendum.

Most of all, these reasons fail to answer two critical questions:

a.By what logic does someone hold a referendum after a deal has been agreed?

b.What happens if the Greek people vote against the deal?

I believe that two options may emerge by Friday:

a.The Referendum is re-called or watered down to such an extent that there is no actual popular decision on the bail-out agreement. A question such as “Do you want Greece to remain in the Eurozone” is one such watered-down question: the question has nothing to do with the reality of the situation.

b.PASOK’s MPs will refuse to vote for the referendum in Friday’s vote. In this case, it will be abandoned.

Opposition leader Antonis Samaras just concluded his speech to the New Democracy Parliamentary Group. It is a sad testament to George Papandreou’s political bumbling that Mr. Samaras, who for months now has issued one extreme statement after another, has started to look quite electable by contrast.

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